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Sunday, June 18, 2017

Restaurant Die-Off Is First Casualty Of California’s $15 Minimum Wage

Restaurants are on the decline in coastal areas of California which have adapted the $15 minimum wage, many closing down altogether.

Guinea pig cities in California testing out the $15 minimum wage increase before the rest of the state have reacted negatively to the change, and that’s pretty bad considering that these areas are far more affluent than their inland neighbors.

[…] San Francisco, an early adopter of the $15 wage. It’s now experiencing a restaurant die-off, minting jobless hash-slingers, cashiers, busboys, scullery engineers and line cooks as they get pink-slipped in increasing numbers. And the wage there hasn’t yet hit $15.

As the East Bay Times reported in January, at least 60 restaurants around the Bay Area had closed since September alone.

A recent study by Michael Luca at Harvard Business School and Dara Lee Luca at Mathematica Policy Research found that every $1 hike in the minimum wage brings a 14 percent increase in the likelihood of a 3.5-star restaurant on Yelp! closing.

Another telltale is San Diego, where voters approved increasing the city’s minimum wage to $11.50 per hour from $10.50, this after the minimum wage was increased from $8 an hour in 2015 – meaning hourly costs have risen 43 percent in two years.

The business decline in these areas means bad news for the rest of the state, where things will likely be far worse if California enacts a state-wide minimum wage increase.

If we can expect similar results to what we’ve seen so far where the $15 minimum wage increase has gone into effect in the state, restaurants who remain in business will likely cut staff to skeleton crews and those already struggling will have to close.

U.S. Census Bureau data show about 21 percent of workers in Bakersfield earned from $8 to $12 per hour in 2015, the most recent year for which data was available. In Fresno, 32 percent of workers were in that wage group, and in Modesto about 25 percent. Contrast that with Santa Clara County, home of Silicon Valley, which registered only 12.5 percent at that level.

“Part of our whole concern with (the $15 wage) is it’s a one-size-fits-all,” Rob Lapsley, president of the California Business Roundtable, told The Sacramento Bee last year. “Areas with double-digit unemployment, this is scaring them to death.”

It’s no wonder either. Perhaps wealthier cities can spare a drop in business, but many places can’t afford the loss.